A moderation in upcoming weather forecasts has put natural gas bulls on the defensive over the past three sessions.
Forecasts grew warmer on Monday followed by continued moderation on Tuesday. This forecast change in turn has dropped the spot natural gas price from a 4.544 high reached in early trade on Monday down to a 4.121 low yesterday which coincidentally came at the 10 day moving average.
The market is now in a corrective phase following a two week rally during which the market rose by nearly 25%.
A "back and fill" correction is expected following such a sharp rally higher.
The first support area to watch basis the December 14 contract is the 10 day moving average which held as support on Tuesday and is at the 4.155 level today. Longer term support is the 40 day moving average and the 62% Fibonacci retracement support both at the 3.970-3.990 level.
Longer term, the market has likely bottomed ahead of winter. The trend for the upcoming months into early-2015 is now sideways to higher.
Speculative funds should be active buyers on ensuing price weakness along with end-users looking to round out coverage ahead of winter.
With ample storage and record high production, this year's winter rally may be more tame than last.
But wide price swings and continued volatility are likely to persist in upcoming trade.
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